Spurt in Iraq oil exports buoys government bonds

06 Nov 2012

Iraq, the second biggest producer of Opec, has agreed to bring back its crude export from Kurdish region, and because of that the Iraqi bond productions cut more than three times as the average on Middle Eastern debt.
According to the data given by Bloomberg, the 5.8 percent dollar-denominated Iraqi government bonds will be matured in January 2028, and the rate on that has by 216 basis points from 1st June and it stood at 6.48 percent on 31st October.
In the organization of petroleum exporting countries, Iraq overtook Iran in June and became the second largest producer after Saudi Arabia. That helps Iraq to bring back the industries after the nine years of US encroachment. The exports in Iraq are rising as the impasse is ended with the Northern Iraq’s self-ruled kurds. The investors like Royal Dutch shell and OAO Lukoil are also helping Iraq government to increase their output.
Liz Martins, senior economist at HSBC in Dubai said that it was a good signal creditworthiness of Iraq. He also added that the security environment in Iraq was not good. This might trouble the non-oil-sectors, but it would not hamper the oil production volume to increase.
JP Morgan Chase & Company’s EMBIG Sovereign Spread Iraq index has showed that the spread between Iraqi sovereign bond and US Treasuries has reduced by 281 basis points. According the data provided by CMA that is owned by McGraw-Hill Cos, the spread was 476 basis points on October 29.
Gabriel Sterne, senior economist in London at Exotix said by phone that the performance of Iraq bonds were very good in the last few months. He also added that the spreads of Iraq bonds had performed in the four of the frontier economies that they monitor.
According to BP Plc, Iraq is the fifth largest crude reserves in the world. Hussain al Shahristani, adviser to deputy prime minister for Energy Affairs, said on October 24 that the output capacity of Iraq had risen to 3.4 million barrels a day in September. He also said that Iraq plans to pump 6 million barrels a day by 2015.
The IMF predicts that Iraq’s economy will grow 10.2 percent this year and will continue its growth in 2013 by 14.7 percent. According to IMF, out of 20 nations in Middle East and North Africa only Libya can grow at a faster pace.
Stuart Bowen, the special US inspector general for Iraq reconstruction said that the political issues between Prime Minister Nuri Al Maliki and his opponents, and the possible war situation with Syria present “daunting challenges”. He also added that Iraq is improving in electricity production and in the crude output.
In the last month, Kurdish authority and central government acceded to restart crude exports after four months stoppage. The cabinet ministry of Iraq approved $118.5 billion budget for 2013 which is 18 percent larger than 2012 for the improvement of roads, industries and airports. From 2003, 19 contracts with Total SA, ExxonMobil and many other oil companies are signed by the oil ministry of Iraq.
Mudhur Saleh, the deputy governor of Iraq’s central bank said that Iraq’s bonds would continue to perform well because the Iraq’s economy had improved rapidly.
Source [The Peninsula Qatar]